Spain’s VAT on a property purchase one of the lowest in Europe

The general rate of VAT on the purchase of a new property is Spain is currently 10% of the purchase price, 4% in the case of social housing, and is one of the lowest in Europe. During 2012, the overall rate was reduced for a short while to just 4% as a government incentive to increase property sales.

Rates in other European countries vary from as low as 3% in Luxembourg, 5% in Rumania, and as high as 25% in Denmark or Sweden. However, recent news from Brussels is suggesting that the Spanish government should increase the rate to 13% or even the maximum rate of 21% in Spain.

As Spain slowly starts to recover from the recession and in particular from a vastly depleted property market, this is surely the last thing they need right now as property sales in Spain have started to recover with an increase in interest from foreign buyers. The domestic market is the most effected, despite prices coming down in some areas in Spain by as much as 50%, so an increase in the rate of VAT would destroy any chances of Spaniards wishing to climb the property ladder.

Whilst the price of property in Spain has reduced significantly in recent years, and if the government was to follow suggestions from Brussels, then more reason for buyers not to wait any longer and take advantage of the low prices currently available as most likely, they won’t drop much further. In fact in some coastal areas, there are signs of property prices actually increasing.